What is the Economic Problem?

Discover the economic problem – the challenge of scarcity of resources vs. unlimited wants and needs. Learn how societies allocate resources to meet demands.


The economic problem refers to the fundamental issue faced by societies – the scarcity of resources in comparison to unlimited wants and needs.

Scarcity of Resources

Resources such as land, labor, and capital are limited, leading to a situation where societies cannot produce enough goods and services to satisfy all their desires.

Unlimited Wants and Needs

On the other hand, human wants and needs are infinite, leading to a constant desire for more goods and services.

Allocation of Resources

The economic problem arises from the need to allocate scarce resources in such a way that satisfies as many wants and needs as possible.

Case Study: Water Scarcity

In many parts of the world, water scarcity is a significant economic problem. While the demand for water is high due to agriculture, industrial processes, and domestic use, the supply of fresh water is limited, leading to conflicts over its allocation.

Opportunity Cost

One of the key concepts related to the economic problem is opportunity cost – the cost of choosing one option over another. Every decision involves trade-offs as resources used for one purpose cannot be used for another.

Efficiency and Equity

Solving the economic problem involves balancing efficiency (maximizing production with limited resources) and equity (fair distribution of goods and services).


The economic problem is a central issue in economics, highlighting the challenge of managing scarce resources to meet unlimited wants and needs.

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